Emerging Litigation Podcast

False Claims Act, Health Care Whistleblowers, and Whistling in the Wind with Justin Lugar

• Season 1 • Episode 91

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The DOJ’s annual report for 2023 revealed that the agency’s Health Care Fraud Unit was its busiest criminal enforcement section, responsible for convicting more than $3.8 billion in False Claims Act and whistleblower claims. There has reportedly been an uptick in whistleblower work among law firms and a record number of whistleblower cases. Still, some healthcare providers and hospital systems tend to hide their heads in their scrubs after being served. 

Today we’re going to talk about how whistleblower cases come about, the benefits of rewarding whistleblowers, how things are done differently outside the U.S., what’s driving the acceleration of this area of law, and best practices when your company is served.  

Drawing on his background as both public servant and private practitioner, my guest, Justin M. Lugar, counsel with WoodsRogers in Roanoke, Virginia, is going to walk through these issues and others. 

Justin represents clients in all types of government investigations. He’s obviously well suited for the task. Prior to WoodsRogers he was Assistant U.S. Attorney in the Western District of Virginia, where he led the Affirmative Civil Enforcement team managing dozens of fraud investigations, many of which had parallel criminal investigations under the False Claims Act and related state statutes. 

Justin served as the Department of Justice’s Civil Health Care Fraud Coordinator, Affirmative Civil Enforcement Coordinator, and Civil Rights Coordinator for the Western District of Virginia. Justin was recently recognized by the Drug Enforcement Agency for his efforts enforcing the Controlled Substances Act, leading to the largest fine assessed against a hospital system in the United States at the time.  

When he was a  federal prosecutor, Justin led investigations involving numerous state and federal agency partners, from the FBI to the IRS to the Department of Energy to the FDA and the Defense Department.  

Justin started his career at a major global firm in London, conducting international investigations around the globe.  But my favorite part of his background is – when he was a religious studies major in college – he lived at a Tibetan Buddhist Monastery in Kathmandu, Nepal. Not to brag, but I just returned from Vermont. 

There is more to Justin’s background, like his LLM in international dispute resolution, which he earned at the School of Oriental and African Studies at the University of London, his J.D. from Liberty University School of Law, and his B.A. from the University of Virginia.  

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This podcast is the audio companion to the Journal of Emerging Issues in Litigation. The Journal is a collaborative project between HB Litigation, a brand of Critical Legal Content (a custom legal content service for law firms and service providers) and the vLex Fastcase legal research family, which includes Full Court Press, Law Street Media, and Docket Alarm.

If you have comments, ideas, or wish to participate, please drop me a note at Editor@LitigationConferences.com.

Tom Hagy
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Host of the Emerging Litigation Podcast
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Tom Hagy:

Welcome to the Emerging Litigation Podcast. This is a group project driven by HB Litigation, now part of Critical Legal Content and VLEX Companies, Fastc ase and Law Street Media. I'm your host, Tom Hagy, longtime litigation news editor and publisher and current litigation enthusiast. If you wish to reach me, please check the appropriate links in the show notes. This podcast is also a companion to the Journal of Emerging Issues and Litigation, for which I serve as editor-in-chief, published by Fastcase Full Court Press. And now here's today's episode. If you like what you hear, please give us a rating.

Tom Hagy:

The Department of Justice's annual report for last year revealed that the agency's health care fraud unit was its busiest criminal enforcement section, responsible for convicting more than $3.8 billion in False Claims Act and whistleblower claims. There has reportedly been an uptick in whistleblower work among law firms and a record number of whistleblower cases. Still, some health care providers and hospital systems tend to hide their heads in their scrubs after being served. Today, we're going to talk about how the whistleblower cases come about, the benefits of rewarding whistleblowers, how things are done differently outside the US, what's driving the acceleration in this area of law and best practices when your company is served. Drawing on his background as both public servant and private practitioner. My guest, Justin M Lugar, counsel with Woods Rogers in Roanoke, Virginia, is going to walk through these issues and others.

Tom Hagy:

Justin represents clients in all types of government investigations, which he's been doing for quite a while. He's obviously well-suited for this task. Prior to Woods Rogers, he was assistant US attorney for the Western District of Virginia, where he led the affirmative civil enforcement team in managing dozens of fraud investigations, many of which had parallel criminal investigations under the False Claims Act and various state statutes. Justin served as the Department of Justice's Civil Health Care Fraud Coordinator, its Affirmative Civil Enforcement Coordinator and Civil Rights Coordinator, also for the Western District of Virginia. Justin was recently recognized by the Drug Enforcement Agency, the DEA, for his efforts in enforcing the Controlled Substances Act, leading to the largest fine assessed against a hospital system in the United States. At that time, when he was a federal prosecutor, justin led investigations involving numerous state and federal agency partners whose titles include just about every letter in the alphabet, except maybe X and Z everybody from the FBI and the IRS to the DOE, the Department of Energy, to the FDA and the DOD, the Defense Department. He started his career at a major global law firm in London conducting international investigations around the globe, in Europe and Asia.

Tom Hagy:

My favorite part of his background he was a religious studies major in college and during that time he lived at a Tibetan Buddhist monastery in Kathmandu, Nepal. Where'd you go on vacation? Also, I need to get out more. There's more to Justin's background which you can find via a link in our show notes, like his LLM in International Dispute Resolution, which he earned at the School of Oriental and African Studies at the University of London, which he earned at the School of Oriental and African Studies at the University of London, his JD from Liberty University School of Law and his BA from the University of Virginia. And now here's my interview with Justin Luger of Woods Rogers. I hope you enjoy it.

Tom Hagy:

. So

Tom Hagy:

we want to talk about today and we can start off with the DOJ releasing its annual report for 2023. It talked about the health care fraud unit.

Justin Lugar:

Yeah, health care fraud is obviously the huge driver of False Claims Act recoveries in the US and it's a huge focus of DOJ.

Tom Hagy:

What did they collect? What $3.8 billion in False Claims Act and whistleblower claims? Are they prosecuting those?

Justin Lugar:

I mean you could call it both really so under the False Claims Act, when you're looking at these DOJ statistics, these are from the civil side of the Department of Justice and so these are monetary recoveries that the government has gone out through investigation, settlements and litigation and recovered essentially taxpayer money back to put back into the federal FISC. And so this represents just the federal portion of recoveries where the government has used the False Claims Act to recover funds. And so there's a bunch of different areas that anytime there's federal funds involved, there is potential for False Claims Act liability for entities that engage you know, engage in any conduct that might be deemed fraudulent. So you've got it in.

Justin Lugar:

Healthcare fraud is the largest sort of subcategory of False Claims Act cases. But you also have things like government procurement contract fraud, where you know somebody has a contract to produce a widget for, you know, the GSA or for the military, or GSA or for the military, or, you know, for use in government contracts, and there'll be some misrepresentation made or the government won't get what it paid for and believes it's entitled to a discount and that some sort of fraud or deception was committed in order to obtain those funds. And so these statistics just sort of lay out what the Department of Justice recovered on behalf of the taxpayer under this particular statutory scheme known as the False Claims Act. Now there are criminal prosecutions under the False Claims Act as well. There is a corresponding statute, but those are much less common because there's a lot of other criminal statutes that cover the same type of conduct and, frankly, it's just easier to charge crimes under different statutes like wire fraud, mail fraud, less elements, easier to prove.

Tom Hagy:

According to this, there are more and more health care fraud claims. Why do you think that is?

Justin Lugar:

Yeah. So I think it's commensurate with a couple of things, one being it is aside from defense budget, it's up there in the top five. If is aside from, you know, defense budget, it's probably got. It's up there in the top five, if not number two, for government expenditures in a given year. Um, so you think Medicare, medicaid and I think part of what's driving that is, frankly, that all of the boomers are are, you know, we're right in the midst of those folks becoming eligible or starting to be in the Medicare program in some shape or form, and so I think the number of people that are in those programs, and thus the funding that goes into those programs, has increased. And so I think what you're seeing is just a natural rise in the number of claims because fraud occurs. You know, whether you're funding it with a billion dollars or a trillion dollars, you're still going to find it. So it's just more instances of it, and I think DOJ too, in the last decade or more, has really sharpened its sword in terms of healthcare fraud.

Tom Hagy:

They really know how to investigate and bring the cases. Are there any particular cases we'd want to share with people? What kind of claims are you seeing in litigation?

Justin Lugar:

Yeah, One of the big initiatives DOJ has announced and it seems to be following through with is focusing on claims under potentially false claims under the Medicare Advantage program. And so Medicare Advantage, you know, has this process called risk adjustment. So they assign risk scores to individual patients and so basically the government agrees to pay kind of a flat fee and it's capitated, and it's a different style, I guess, of just a claims-based payment where, hey, I went to the doctor and I had an expensive X and the government's going to cover 80% of it and I'm going to pay the other 20% out of pocket. Medicare Advantage is a really risk-based gamble between the healthcare provider and the government. And you sort of look at the person's health and you say, all right, if one is our baseline of what the average healthy person at this age, with this demographic is, we think this person is going to be a 0.9 or a 1.3. And if you're right as the healthcare company and you hedge correctly, you can make money care company and you hedge correctly, you can make money. If you're wrong you're in trouble. But it gives some certainty to the government as to the amount that it's going to have to pay for a given patient for a given year under a given plan, and so what you're seeing is a focus on whether or not the insurance companies that are Medicare Advantage providers are accurately, and in an honest and truthful manner, diagnosing and using the right sorts of codes to actually capture the care they're giving, because there are ways to risk adjust that will cause the reimbursement to go up, and it's the only way to really increase the amount the government pays you if you end up taking a bath on a particular patient's care. And so DOJ has really honed in on that and they settled a big case last year I think it was $172 million case against I think it was Cigna, if I remember correctly and so I think you're going to see a lot more cases in that space, because once the DOJ kind of has their teeth in one and has figured out how to do it, the methods are usually pretty similar across different companies. So I think looking at Medicare Advantage and how that plays out in the next few years is going to be interesting. You're also seeing and these get captured, I think, in part under healthcare fraud but COVID-related claims, so, for example, under some of the CARES Act relief that was provided during the pandemic under HHS, so Health and Human Services there's a sub-agency called the Health Resources and Service Administration or HRSA insured fund.

Justin Lugar:

The principle behind it, as I understand it, was hey, we want to incentivize people who even, even people who don't have coverage, to be proactive about getting tested for COVID and treated for COVID. Um, because early treatment is, you know, supposed to be the best way to to prevent a bad outcome. Right, you deal with it early. So the idea was they didn't want you know, the government didn't want people being afraid to go to the ER because they didn't have insurance if they thought they might have COVID-like symptoms and they wanted to get tested. Well, so they created multi-billion dollar funds to pay hospitals so that hospitals would willingly treat people without insurance and, you know, realized, hey, we could actually get reimbursed for this. And so there's different types of claims there.

Justin Lugar:

The program was intended to cover testing claims. So if somebody comes in and says, hey, I think I've been exposed or I got a cough, you know, you test them, you can submit those claims for reimbursement to the government for testing. And then there was COVID treatment claims as well. So if you're actually diagnosed or have a primary diagnosis of COVID, then it would cover all the incidental care that comes with that. So, for instance, if I go into the ER, I'm uninsured, I get a COVID test, I test positive and then they have to treat me for COVID.

Justin Lugar:

You know, any of the scans that go along with scanning my lungs or any incident giving me an IV because you know I've not been able to retain fluids, whatever it may be, hospitals were going to be reimbursed for that.

Justin Lugar:

Well, I think what you're going to see and what we have seen is an uptick in cases where folks are saying insiders, whistleblowers, are saying, hey, we were submitting for reimbursement claims that weren't really COVID specific. You know, we might have claims that you know, everybody knows that when you went to the doctor during that time period, you always got tested for COVID, right. And so I think there are concerns that healthcare providers in some instances would monkey with the coding or, you know, switch a primary diagnosis in order to make sure they could get the care covered and they might end up treating you know, doing an ankle surgery or something and trying to loop it in under this COVID and say, well, covid was the primary diagnosis, but you know, while we were in there we decided we needed to help them with this issue, and so I think you're going to see a lot of second guessing of how those claims were built.

Tom Hagy:

Trying to see a connection between COVID and an ankle surgery or something. Yeah no, there isn't right. I coughed so hard I twisted my ankle Right.

Justin Lugar:

Yeah, and then you might see other stuff.

Justin Lugar:

I think some of the public information about settled cases were things dealing with electronic medical records in particular, and so you've got kind of two prongs there.

Justin Lugar:

One is you know there's a anytime you have electronic records involved, there's the ability to build into the code you know suggestions about what drugs to prescribe or suggestions about what the next step of care should be, and, while well-intentioned in many cases to make sure you deliver the best care, we want doctors to be independent and to make decisions about the care based on the patient in front of them, not some pre-populated decision tree that might point them in a direction that favors a drug company or somebody else who isn't on it.

Justin Lugar:

I think you're going to see stuff like that, and then also in the EMR, the electronic medical record space, you're starting to see an overlap, I think, in the healthcare fraud world with the cybersecurity initiative that DOJ is also really gung-ho about, because protecting personal health information and PI is really important and it's a requirement of any government program, but some have more strict requirements than others, and so I think you're going to see more cases where you know people are really struggling to get up to speed with cybersecurity rules and protect personal information. And every time they sign a provider agreement or submit a claim for reimbursement, they're certifying to the government that they have proper cybersecurity protocol in place to protect that information. And so if you get big data breaches, you might see the government using the False Claims Act to try and you know penalize and get some of those funds back and say that's not what we paid for. We paid for a secure system and you didn't provide one Right.

Tom Hagy:

Yeah, gotcha. So how are healthcare providers and hospital systems responding when they're being served in these cases?

Justin Lugar:

You know it really depends the more sophisticated the system, you know, the larger the system, the more controls they're going to have in place to make sure subpoenas get to the right place and that sort of thing. But you know, doj also has a very strong policy and you know I just left DOJ two and a half months ago, so this was sort of drilled in for the last six years when I was there was cooperation credit and when, really, where's the line between, like, what your legal obligations are as someone who's permitted to operate in a free market and avail yourself of the protections of the law? Where does that line stop? And your duties as a good corporate citizen begin to cooperate with the government? And so I think there's a tension constantly between private sector and the government, between, well, government you've sent out a request, for you know it's going to cost us $40,000 to provide these documents to you. Look how cooperative we're being. We're spending all this money, whereas DOJ views that as well. That's just the cost of doing business. Like you want to operate and contract with the largest, essentially bank in the world, like, then you've got to follow our rules and it's expected of you that you are going to respond to our subpoenas and that you're going to provide the information you want.

Justin Lugar:

But I think one thing for healthcare providers that haven't dealt with these situations is there's always room for negotiation when you get a subpoena or when you get served with something or you get a request from the government. I've always found that, on the defense side of things, the earlier you engage with the government and start negotiating and start cooperating, trying to figure out ways to refine what they're actually focused in, then the better results you're going to get in the end. You're going to save money, you're going to save the government in your own time and you're really going to be able to get to the heart of an issue without a bunch of pomp and circumstance. Pomp and circumstance and if you do that, you know I always tell people like 95% of the work I do no one ever hears about and that's because I'm doing a good job. Right, they don't get indicted, they don't have a big settlement number that's flashed all over the news and you try to work these things out before they become public and before they become a much bigger deal.

Tom Hagy:

So ignoring it isn't a good strategy.

Justin Lugar:

I call it ostriching away, like just putting your head in the sand and hoping it goes away. Maybe you get lucky once in a hundred times that maybe the AUSA or assistant US attorney or government attorney somehow gets in the bottom of their stack and they forget about it. But I can tell you what if a subpoena is cut at any point, someone is tracking that subpoena, whether it be at the US attorney's Office or the Department of Justice or the agency that is the one that wants it, the information. So it might be in the healthcare space HHS, oig. They're tracking it and their supervisors are saying, hey, when's that subpoena return, coming back? Why haven't you heard from them? So it's not going away. If you get a paper, you got to deal with it.

Tom Hagy:

How do?

Justin Lugar:

you deal with it, one of the first things. I mean, I think if you got in-house legal counsel, obviously they're going to be involved, but getting somebody outside to look at it. There's a lot. You can tell by where a subpoena comes from. What is requested in the subpoena, what type of subpoena Are we talking about? A healthcare fraud subpoena which is issued by a criminal function? So that'll tell you whether it's a criminal case potentially versus a civil. Is it a HIPAA subpoena? So Health and Human Services and state Medicaid programs will a lot of times use HIPAA subpoenas, which you really can't tell a lot about a HIPAA subpoena?

Justin Lugar:

It could just be seeking records that are related to another investigation, where you're not a subject or target of the investigation. Is it a civil investigative demand? If I get a civil investigative demand, then I know that there's a False Claims Act investigation and what that tells me is that there could be a whistleblower and so there could be information that you know everything that is happening on the defense side could be being communicated to the government in real time. You know there could be an insider and so you try to figure out. You know what is the government focused on. If it's a grand jury subpoena, then you know it's probably a much bigger problem, unless you're just a witness, which usually the government will tell you that pretty quickly.

Justin Lugar:

But yeah, the key is you can figure out a lot of information about what's going on by where the subpoena comes from, who issues it, what type of subpoena it is, what's requested, and then outside counsel can hop on the phone immediately and start the dialogue with the government attorney that's identified on the subpoena or the agent that is identified. And that's where you start fishing. You start trying to get as much information as you possibly can which helps your client negotiate the terms of the subpoena, figure out what documents they really want, what information they're really looking at. If you've just buried your head in the sand and they're playing the ostrich game, you're missing out on an opportunity potentially to find out. Hey, wait a minute, we're just a witness. They're looking at this doctor who you know did surgery at this hospital and we just need to provide them the record so they can finish their investigation. Okay, but if you don't deal with it, you don't know that.

Tom Hagy:

So does that get to trying to find out the origin of the investigation? Is that what you're talking about?

Justin Lugar:

Absolutely, and so it also it helps on the defense side. It helps you frame and isolate where the weakness, potential weak areas are, where you need to look internally to figure out what is going on In order to be able to effectively represent yourself and defend your company's interests or individuals. Whoever it is facing government inquiry is. You've got to understand what the boundaries of the problem are so that you can hone in on the really key issues. Figure out what the facts actually are so that you can then start the process of advocating and trying to explain to the government why they're wrong about X or the fact that you got from this person is only half of the story. Let me give you the rest of the story. That is absolutely essential to defending someone effectively and making sure you protect their interest is trying to keep them in a witness category, trying to keep the government from thinking that there's been any wrongdoing on your part, and if you ignore it or don't know where to look, it's like trying to build a puzzle in the dark.

Tom Hagy:

Right.

Justin Lugar:

Never going to get there.

Tom Hagy:

Right. Is there a typical way that whistleblower complaints start?

Justin Lugar:

It depends. I mean, if we're talking in the healthcare false claims, you know context, I will say, from having prosecuted these cases. And when I say prosecuted you know a lot of times we'll have civil and criminal inquiries into stuff and then you'll figure out whether it's more criminal or more civil or maybe it stays both. But prosecuting just means going after potential fraud on behalf of the government. So one of the trends that I noticed and I've had the fortune of representing whistleblowers, I've had the fortune of defending companies that have been accused of fraud in relation to whistleblowing, and I've prosecuted government cases where we're kind of working hand in hand with the whistleblower to pursue a case. And so one of the trends that really popped out and I think this would be almost a universal statement, folks who've done this before is there are so many opportunities, typically internally at a company, to have the whistleblower provide the information to the company before it ever gets to the point of the government you government. It's almost like you're on the highway and you have 15 exits that'll take you to the same place and it just depends on which one you take, as to what path you take, and that can make all the difference in the world.

Justin Lugar:

So one of the things I found is that whistleblowers very frequently they create a very thorough and ongoing record of their gripes, their complaints, their concerns, and it'll be in writing.

Justin Lugar:

Usually it happens over a period of time by the time it gets to the government.

Justin Lugar:

It's one of two things Either the company has just ignored it or they haven't adequately addressed it in a way that satisfies the whistleblower.

Justin Lugar:

And so one of the big lessons that I've learned from seeing how this plays out is if you're a company and someone comes to you and says I think we're doing something wrong, like at the earliest outset, whether they're right, whether they're wrong, whether they're crazy, whether they're sane, whether they have all the information or not, you've got to engage with that person immediately.

Justin Lugar:

Now you've got to also communicate with them in a way that lets them know hey, I don't know how many times I've seen cases that were filed right which eventually come out from under seal and become part of the public record. Maybe the press picks up on it, maybe not, but it's based on half information, so the employee whistleblower will only have a part of the story, and then it takes six years and by the time it gets to the government, we're able to fill in the other blank and realize there's not a case. Or maybe there is a case and so if the company just engages early and has processes in place to genuinely not just, like you know, pay lip service to oh yeah, here's a hotline you can call.

Justin Lugar:

But, actually look into each one and say, OK, this person says that we're submitting a false claim for payment. But what they don't realize is that six steps down the line that supposed false claim for payment is actually pulled out of the queue. Because we realized the diagnosis code was not properly categorized and we looked at the chart and we said, oh, that's not the right thing. So we never actually submitted it to the government. So there was no fraud, there was no completed false claim. But if the whistleblower on the front end doesn't know that it went through that process and was pulled out, they may think this is just the way the company does business. And until the government figures that out, which is many hundreds of thousands of dollars in legal fees and paying document processing fees and all that stuff down the road, it could have been nipped in the bud at the very beginning.

Tom Hagy:

Can you give me a little bit of a perspective from the whistleblower, because it just sounds like such a risky undertaking to become one. There are incentives. Talk about that and what that experience is like it is a big step there.

Justin Lugar:

I mean most whistleblowers I've dealt with and this is not universal, but most are very conscientious, thoughtful, analytical folks who you know really are concerned about something. I mean very few of them know that they can monetize their information until far down the line. You know, once they get a lawyer they might figure out that they can monetize it. But it doesn't usually start that way. Usually it starts with ah, you know there's this thing going on at work and you know I don't know what it is, but it doesn't feel right, or you know, and so you run the risk. So you do have whistleblower retaliation protections under US law.

Justin Lugar:

But who wants to go to work and be the pariah Right? Who wants to? Who wants to like be on a knife's edge at all time? Who wants to put their career on the line, their reputation? What if you're wrong? What if you think you're right and you put your neck out there and you've just gone to the guillotine for no good reason? You know it's a really risky thing and under the False Claims Act your identity will be known eventually. There is no anonymity under the False Claims Act. Under other whistleblower schemes there can be anonymity, like SEC whistleblowing and anti-money laundering. There's some anonymity involved there, but it's super risky. And so people who sort of discount whistleblowers and say, oh, they're all just greedy money, hungry, you know, snitches or whatever, you know whatever derogatory term you want to use for them.

Justin Lugar:

That's very rarely the case.

Tom Hagy:

I've very rarely seen opportunistic folks for it and put all the time and energy and risk and frankly, like lawyers, don't want to represent folks like that because they know it's not going to be a return on the investment. Some of them don't even know they can monetize or there will be.

Justin Lugar:

And even if you do I mean if you what is it? I think the statistic I don't know what the current one is, but you know the government has a choice. When you file a false claims at case, you can proceed without the government if they choose not to take over your case. So you always want the government to take over your case if you're a whistleblower, but the government only takes like 10%, 12% of cases and of those, not all of them end up in a result, a verdict or a settlement, and then very rarely do whistleblowers go forward without the government. I do think you're going to see more of that as more cases are filed and the government has just fewer and fewer resources to tackle the problems. But I'd contrast it with some of the stuff that I've been looking into and watching in the UK, right, yeah, so you've said that things are different in the UK, that they don't monetize whistleblowing.

Tom Hagy:

Why do you think that is?

Justin Lugar:

It's a cultural thing and I'd studied abroad there and sort of you know, dabbled a little bit in understanding the cultural norms around this. But you know they have ombudsmen, they have lots of different ways to report misconduct or perceived problems, but there's very little protection for whistleblowers. And even the definition of whistleblower under their current legislation it requires you to be an employee, right? You can't be a third, like what? If you're a contractor of another company that sees the fraud, you can't be protected. Then I mean it doesn't make sense. But what's really interesting is the serious fraud office, the SFO, in London, which is kind of the equivalent to like it's kind of a mixture of the DOJ's fraud division mixed with the SEC for securities regulation here in the United States. What typically has been the sort of MO there or the ethos of whistleblowing is, you know we're going to look into claims come whistleblow, but that's it. I mean you just should do it because you're brave and want to do the right thing right, and then we'll ferret it out. And the prior directors of the SFO had no interest in, you know, advocating for monetizing information.

Justin Lugar:

The newest SFO director, who was appointed in, I think, fall or early winter of 2023, zach F Grave. He's actually a law enforcement officer. He's not a lawyer, he's not, you know. He comes at it from a different perspective, I think, in that he investigates, he's always investigated crime and he's the you know the one out there in the trenches on the ground seeing how this stuff happens. And he, I think he has a real appreciation for insider information and how valuable it can be. That can be what makes a case.

Justin Lugar:

I mean um, and so he came out in his first public speech, I think in February of this year. He flat out, he said it. I mean and I don't have it right in front of me, but the quote is something like we should pay whistleblowers. I mean we should change our law and pay whistleblowers because the um, the cultural, you know implications of like incentivizing people to tell on others. You know it's far outweighed by the benefit. And if you look at, if you look at the United States, right, and since the just under the false claims act, it was revised in 1986 and really gave it teeth, starting in 1986, senator Chuck, chuck Grassley really put it and he still to this day focuses heavily on it the United States has recovered like $73.5 billion for the taxpayer and they've only paid out like nine. That's like a 737% return on investment, I think any of us.

Justin Lugar:

If we invested a dollar and got 737 back, we'd all be pretty happy about that, right? Where can I do that? Yeah, exactly what other place can you do that? So I think that, and so the UK. There is a real momentum. There's a bill pending in parliament right now. It doesn't monetize, it doesn't provide for monetary incentives for whistleblowers or for compensation, but it does make it a little bit easier for whistleblowers there to get protection under the law.

Justin Lugar:

I'm reading a book and I recommend it by Dr Peter Duffy. He was a consultant urological surgeon in the UK who has written two books. Now I'm on his first book, but he talks about whistleblowing and the problems he found. It's called Whistle in the Wind. It's about his struggle to out sort of problems with the national health system in the UK and how certain private interests were being prioritized because it led to more money for the NHS Trust, how it led to direct patient harm problems and then he lost his career. I haven't gotten that far in the book yet, but he's about to lose his career. Then the amount of retaliation he faces, both from his peers, from management, just the culture of the NHS is this is an institution far bigger than you, and he had to incur tens of thousands of pounds to go before an employment tribunal to try and clear his name, and it put the onus on the whistleblower to go clear their name, and really we should be saying like thanks for pointing out these problems, let's figure out how to fix them right. It's a very different experience and to me it captures the risk of not protecting whistleblowers and not incentivizing them to come forward, because I mean, it's just so.

Justin Lugar:

Brandeis said this, chief Justice, that you know sunshine is the best disinfectant. Air it out, let everybody see it. That's the best way to deal with it, and so I'd highly recommend it. I think the UK is on the cusp of really seriously reconsidering it, and one of the things that SFO director F Graves said in his speech too as well, in addition to we should pay whistleblowers is you know, there is at least 700 UK based whistleblowers who went to the US to blow the whistle because there was no mechanism for them to do it and to hedge their career risk, their family's risk for coming out with information, and so they found someone who was able to help direct them to the US system, and so you've got people queuing up here in the US to tell about fraud that touches in the US too.

Justin Lugar:

But imagine what would happen if you actually had the largest financial systems in the world, whether it be in Asia or Europe, the UK, france, wherever being able to go to their regulator and say hey, my company is doing this and it's affecting the bottom line this way and it's defrauding investors all over the world. I mean, everything's connected now, and so it seems to me to be kind of commonsensical to to incentivize this.

Tom Hagy:

Right, yeah, you wonder why let's just say corruption. You wonder why it works because so few people. I mean there's so much risk of calling it out.

Justin Lugar:

And I mean even the United States recognizes that with there was a anti money laundering whistleblower provisions passed in the last two or three years, and I think it was Chuck Grassley and a couple others. They wrote a letter to FinCEN, which is the financial center, the enforcement arm of the IRS, saying hey, where are the regulations? Congress passed a bill two and a half years ago saying that we want to create a whistleblower program for anti-money laundering to help us monitor when funds are being moved to get around sanctions. Whether it be North Korea, iran, russia, oligarchs are laundering money in this country and elsewhere. The only way we're going to be able to break through the barriers to develop sources. Well, one of the ways you can develop a source and inside sources to incentivize them with money FBI and other groups can pay confidential informants, but not in the same way that you can pay them if they get a share of the recovery of the fraud that they out.

Justin Lugar:

There's a real push to, I think, to figure out all right why has FinCEN not put in regulations? How far along are they in the process of notice and comment rulemaking? What kind of fraud are we missing? Because we've passed the laws but not implemented them, and so you're even seeing that tension here in the United States, and I think the anti-money laundering, whistleblowing protections are going to go a long way, and I think Europe's going to see that too, because there's so much money that is laundered across Europe Western and Eastern Europe and in the United States, and so I'm hopeful that folks will look to the US and our experience here and hopefully they'll let us help share our experiences so that they can create as good, if not better, systems.

Tom Hagy:

So is it fair to say so you're doing defense work, yeah?

Justin Lugar:

I do mostly defense work, a little bit of both.

Tom Hagy:

You're obviously a fan of whistleblower programs.

Justin Lugar:

Yeah, I think they're great for everybody, including the companies who are on the receiving end. Sometimes it can be a very good. You know, you go to the doctor sometimes and get a physical and you don't get great news. But that's an opportunity as well to better yourself, right. While these things can be, investigations can be painful and expensive, right, and hurt the bottom line, no doubt about it.

Justin Lugar:

If you've got the right mentality or maybe you can tweak your mentality, if you're in a compliance group or a C-suite, say, hey, wait a minute. Like these regulations they may be, you know, sometimes a little bit technical and sometimes a little overbearing, but hey, we do operate in this space. Like, this is a chance for us to like get a little bit fitter when it comes to our processes and controls and let's treat this as an opportunity to grow and become a better, more compliant organization, because that's going to earn our shareholders, whether if you're a public company or if you're a nonprofit. It's going to give us a chance to survive and be better, and I think that's good for everybody.

Tom Hagy:

Justin Luger, thank you very much for talking with me today.

Justin Lugar:

I appreciate the opportunity and hope it helps your listeners.

Tom Hagy:

That concludes this episode of the Emerging Litigation Podcast, a co-production of HB Litigation, critical Legal Content, vlex Fast Case and our friends at Lostry Media. I'm Tom Hagee, your host, which would explain why I'm talking. Please feel free to reach out to me if you have ideas for a future episode and don't hesitate to share this with clients, colleagues, friends, animals you may have left at home, teenagers you irresponsibly left unsupervised, and certain classifications of fruits and vegetables. And if you feel so moved, please give us a rating. Those always help. Thank you for listening.